Experienced Buyers, Long-Term Fee Contracts, and the Value of Property Transactions in the Hotel Industry

Abstract

Hotel property sales have often been bundled with contracts, such as franchise agreements and management contracts. In these transactions, the seller/operator and the buyer/owner essentially entered into a long-term relationship. The present study accordingly proposed that such transactions could be viewed as a strategic alliance, rather than a one-time asset disposition. Specifically, it was hypothesized and confirmed that buyers’ experience in hotel investments could enhance the value of long-term fee contracts bundled with transactions. In addition to estimating the transaction premiums at the property level, the present study could contribute to the hospitality industry by demonstrating the value of specialist buyers in property sales bundled with contracts. For decision makers, the results suggested that buyer selection could be an important consideration in property sales bundled with contracts.